Bandwidth Is the New Black Gold

By Tim WuThursday, Mar. 11, 2010

Illustration by Oliver Munday for TIME

Everyone knows someone who has experienced the 21st century's quintessential gotcha moment: the unexpected, budget-breaking mobile-phone bill. Most aren't as bad as the $22,000 bill a California man received from Verizon Wireless for his teenager's Internet usage, or the New York family whose iPhones racked up nearly $4,800 by automatically checking for e-mails on a Mediterranean cruise.

But these incidents aren't just stories of human folly or corporate greed, they're subtle signs of a deeper issue: the increasing shortage of bandwidth relative to Americans' growing appetite for it. In the U.S. in 2010, a family can easily spend hundreds of dollars a month on cable, mobile phones and Internet and telephone services. Some families already spend at least as much on bandwidth as they do on energy. Face it: Americans love their smart phones and Internet television as much as they love their cars and air conditioners. When you have a scarce resource, an industry run as an oligopoly and a population that can't get enough, you have all the ingredients for the first new resource crisis of the millennium.

Technically, bandwidth is best defined as the capacity to move information through a channel. The more information you move through the channel, the more bandwidth you use; hence video uses much more bandwidth than, say, e-mail. A bandwidth shortage occurs at any point when the demand to move information exceeds the capacity of the channel. So when every iPhone user in New York City wants to watch a video or get online, AT&T's wireless channels get flooded, and no one can get through.

In time, the mere slowdowns we see today may be eclipsed by full-scale information traffic jams. But beyond that, the deeper problems will be with high prices and possible profiteering. As demand for bandwidth goes up, suppliers will logically be able to charge more, as happens in energy markets.

Can we rely on private industry  the cable and telephone companies  to build its way out of these problems? In a word, maybe. On the one hand, each individual bandwidth supplier  Comcast, AT&T and so on  faces possible customer defections if its services get too bad, and to their credit, those companies are now investing billions of dollars in infrastructure upgrades. On the other hand, the industry collectively may be conflicted about how much capacity it really wants  and how much it wants to pay for. Since the 1970s, it has been obvious that installing fiber-optic cables, which use lasers to carry information, could solve most of the home-capacity problems for a very long time.

Yet with the exception of Verizon and its FiOS program, the U.S. bandwidth industry has been reluctant to go beyond its copper wires. For one thing, upgrading to fiber is really expensive. For another, offering users massive Internet bandwidth can create a good reason for them to cancel cable and telephone services, because they would be able to get much of what they want from the Internet.

Under the Obama Administration, the FCC regards bandwidth supply as an issue meriting national attention, and it has been formulating a plan to encourage home bandwidth. But there's reason to think that the most serious problems  the real bandwidth shortages  will be in wireless, where demand is growing and supply is weak. The industry cannot keep up with wireless demand, and we're already seeing more dropped calls and slow connections as well as those enormous bills for data plans. In a nightmare scenario, jams become the norm instead of the exception, just as they are for our cars. Wireless carriers could use the scarcity to profit, setting aside net neutrality and charging obscene rates for priority calls and guaranteed bandwidth.

The bottom line is that if everyone keeps using the Internet and other services as much as they like, something will have to give. It is unlikely that the American appetite for bandwidth will diminish anytime soon, nor is it even clear that we want it to. But if we want the pleasure and convenience of a high-bandwidth society, someone will need to figure out a solution to the bandwidth dilemma soon.

Wu is a professor of law at Columbia University and the author of the forthcoming book The Master Switch